Tuesday, February 10, 2009

So I run across the following post in the National Review's The Corner blog, a place so intellectually vapid it makes William Kristol's New York Times column seem like a work of Solomonic wisdom in comparison:

This morning the Heritage Foundation, in conjunction with the Club for Growth, held a conference on the supposed stimulus bill. Here's what one of the speakers, CATO Economist Arnold Kling, had to say about the Democrats' economic plans:

“I think about the stimulus as an economist but I feel it as a father. Barack Obama is destroying my daughter's future. It is like sitting there watching my house ransacked by a gang of thugs. That’s how I feel, now back to how I think.”

The event was liveblogged on Heritage's blog, The Foundry. There's a lot more on the event there.

Now, my first reaction was to sneer at the NRO blogger who, after 8 years of tax cut induced deficits that managed to double the national debt, has suddenly experienced a Damascene conversion and now believes that deficits are, indeed bad. I was going to post a note to that effect on this blog, but point out that as far as this fellow Arnold Kling is concerned, I just don't know enough about him to say whether or not he too is a convenient convert to the religion of balanced budgets.

Some Keynes for Bush

"Arguing in My Spare Time" No. 3.28

by Arnold Kling December 20, 2000

...

Times may not be good much longer. In January, I predicted that the next President would face a recession caused by a stock market crash. Also, I predicted that the President's economic advisers might not know what to do about it. Subsequent developments have been along the lines that I feared.

The father of macroeconomics is John Maynard Keynes. Since the 1960's, his reputation has declined steadily, particularly among conservative economists. I continue to believe that Keynes is relevant today. What follows is some elementary Keynesian economics that President-elect Bush is likely to need but unlikely to hear.

...

My Recommendation

Overall, if you accept points (1) - (5), there is a case for thinking in terms of turning the Federal Budget in the direction of a deficit. How should this be done?

One approach that would be congenial to Bush would be a large tax cut. Unfortunately, much of the tax cut that was part of his campaign was "back-loaded," with the larger cuts occurring farther into the future. If anything, we probably need a more front-loaded tax cut.

In addition, some of the tax cuts most popular with Republicans may not be very stimulative, because they are likely to be saved rather than spent. For example, eliminating the "death tax" is unlikely to unleash much spending. I cannot imagine that the marginal propensity to consume out of inheritances over $700,000 (smaller inheritances are tax-free today) is very high.

Another approach to running a deficit would be to increase Federal spending. However, the notion that the first Republican President-plus-Congress since 1952 would go on a spending spree is difficult to contemplate.

An alternative would be to give large grants to state governments--what used to be called general revenue sharing. For example, the Federal government might give each state $1,000 for every person living in that state. This would amount to a $280 billion program.

One impact of a recession is to reduce state revenues. Because they are obliged to balance their budgets, this leads them to reduce spending. The result is to reinforce the downturn. However, with revenue sharing, the states would have less need to cut back.

In conclusion, I believe that a large, temporary revenue-sharing program would be a good approach for fighting a recession. This form of fiscal stimulus would quickly find its way into the economy. Unfortunately, I suspect that there is little chance of any Keynes getting through to Bush.

So this CATO Institute economist who depicts Barack Obama's simulus plan as akin to a gang of thugs ransacking his house, and who worries for his daughter's future, is the same guy who back in 2000 was urging Bush to go on a Keynsian spending spree?

46 comments:

I have changed my views some since the year 2000. But I remain a bit of a Keynesian. I just don't think that Obama's policies are Keynesian. They are not what economists would come up with if asked to design a stimulus.

Perhaps he also means is that the skin color of the potential Keynesian has changed markedly. Why else would "some" change of opinion turn into a denunciation of a "gang of thugs" set to ravish one's daughter?

And Mr. Kling, part of the reason the stimulus is not Keynesian enough is the Republican "centrists" who needed to be courted.

I think this is a poor example of "gotcha". I feel exactly as Arnold Kling does when I look at my children. And pointing out that Bush was terrible does not mean the same policies carried even farther suddenly become good. Finally, the quotes are not that disparate. Klings arguments in 2000 were that in a recession some deficit spending as a fiscal stimulus can be desirable, but that this ridiculous 1 trillion dollar non-stimulative bill is not the same thing at all. I doubt strongly he would have supported this even if Bush were still president.

Kling's language about thugs has the nasty undercurrent of racism, and his "clarification" statement about changing views is transparent nonsense. After trashing our economy (and the Constitution, our Army and National Guard, our alliances and relationships, our reputation for uphlding human rights, the integrity of science and the general rule of law) these "thinkers" now are converted to fiscal conservatism?

Arnold Kling meant: "Senator, at that point in time, I don't think anyone could have anticipated anyone using ballot boxes to fashion weapons of mass construction. And the thought of such an assault being directed by an admitted liberal was, frankly, beyond the realm of rational thought.

First, it's "SHAMELESSNESS" not "SHAMLESSNESS" -The policies of the right are little more than a collection of shams.

Second, thanks for the post. The right-wingers are going on full-throttle "baffle 'em with BS" mode when it comes to Keynesian economics and FDR's policies. They understand that their "invisible hand of the marketplace" is often slapping the average working American in the face, and jerking off the rest.

I had an opened mind regarding the Libertarian Party and even voted for them in local offices on a few occasions in the 90s. But a press conference at the CATO Institute televised by C-SPAN in the late 90s changed my mind. After seeing the debacle of deregulated (privatized) natural gas distribution in my state, I was elated to see one journalist as this question (paraphrasing from memory): How do you explain the approach of "letting the marketplace decide" when every example of deregulation - water, natural gas, electricity - has failed to live up to the promise of more competition, better service and lower prices. In fact, just the opposite has occurred? Can you cite an example of where deregulation has actually increased competition, improved service, and lowered prices, and can you explain the failures in the numerous places where that has not occurred? The CATO spokesperson was visibly squirming when he replied that, "True deregulation hasn't happened anywhere yet." - A complete load of crap!

Don't get me wrong. Capitalism is the engine that drives the country. But every engine has a governor to keep the engine from running wild and destroying itself. A healthy economy requires adequate regulation for the same reason an engine requires a governor.

It's always amusing to me how the generic term "economists" gets employed in argument, and in this case, by Mr. Kling himself in his response to the original post. The idea that there is consensus among economists on this issue is laughable--especially given what a large percentage of economists argue that the stimulus doesn't spend enough. But Kling settles for the generic "economists" line...though we all know that what he should be saying is "They are not what Republican economists indicted by the failure of the Bush administration and desperate to restore a shred of credibility to their tattered reputations would come up with if asked to design a stimulus."

And I used to joke that when Bush took office we were promised the steady, measured, guidance of Adam's Smith's invisible hand, what we got instead instead was bent over and reamed by Ayn Rand's invisible strap-on.

I read the post about Arnold Kling and then I read what he wrote in 2000. Rarely have I have I ever seen anyone hoist so spectacularly on their own analytical petard!

But wait! As if to prove the point about shamelessness, this guy comes back and posts here. Right here where everyone can read what he wrote back then. He has the nerve to say assert some false distinction to the effect that he doesn't "think that Obama's policies are Keynesian."

But when we read his post from 2000 we see that it is point for point exactly what Obama has put forward. Even Kling's suggestion that state and local governments will have to spend. This was a big chunk of the plan that the Republicans eviscerated.

So Obama's policies "are not what economists would come up with if asked to design a stimulus." Kling, come on. This is a bald face lie. Obama's plans are point for point what you propose in the earlier piece. And each element of the plan follows exactly the same logic of demand side weakness.

Ok, I know. Blogs usually carry a lot of unsupported nonsense opinions. And even opinions about other people's opinions. But Kling has some nerve to do anything except hide under the table right now.

From the link at the wing-nut Heritage Foundation, Sean Hannity's favorite "think tank" (aka Adult Day Care for the Otherwise Unemployable):Kling stressed that profits are the key to economic recovery. Profits and losses are signals in a market economy. Huge losses in the financial sector signal that that sector needs to shrink.

First of all, "Profits are the key to economic recovery." If I can steal a quote from the Guiness commercial: BRILLIANT!

The rest is just as inspired. "Huge losses in the financial sector signal that that sector needs to shrink." Really? Then huge profits, as we saw in the previous seven years or so signal that the sector needs to grow (i.e. "bubble" up)? That makes perfect nonsense.

Kling's statement offers no insight into the situation at all. He's merely giving the obligatory verbal hand-job to his fellow Heritage/CATO lackeys.

Via the Wall Street Journal, here's what the "magical invisible hand of the marketplace" will get you:

Kling says he feels ransacked by thugs? How the hell does he think the people who trusted these captains of industry, these mavens of the marketplace, with their life savings? What about the investors and workers at Merril Lynch? Tyco? AIG? Enron? Lehman Bros., etc., etc.?

The extreme laissez faire policies promoted by Kling's cohorts at Heritage, CATO, et al, and implemented by Bush/Cheney, have put us into the ditch of The Bush Depression. They are now desperately trying to hawk the idea that their policy of "More Of The Same™" will somehow fix the situation we're now in. THAT is the definition of insanity.

Perhaps Mr. Kling can explain what changed his view over the past 8 years, and what his "feelings" were towards the economic policies of the last administration.

no seriously, if you remove a mention of a person's race, but place that person within an old, well-worn racist trope concerning the allegedly violent and sexually predatory nature of that's persons race, there's no basis for accusations of racism. its totally ok! especially when an "economist" randomly analogizes a policy proposal to the rape of his daughter. isn't that the first thing any respectable economist would analogize to with respect to an economic policy that he falsely claims to dislike and distrust?

The history of this sort of imagery by right-wingers is long, well documented, and even if Kling himself did not overtly intend racism, the comment is so steeped in the history of such usage that the effect is the same. Lack of intent (if such is the case) does not purify the imagery.

i don't know if Kling's comment was subjectively racist or not, my point was to refute that assertion that there was no basis for such a claim. i think it was a weird way for him to complain, to actually bring his daughter into the equation. i mean, if i refer metaphorically to an industry "raping the land," i don't add- "it's like my daughter out there being raped." that's disturbing.

"no seriously, if you remove a mention of a person's race, but place that person within an old, well-worn racist trope concerning the allegedly violent and sexually predatory nature of that's persons race, there's no basis for accusations of racism. its totally ok! especially when an "economist" randomly analogizes a policy proposal to the rape of his daughter."

This is fascinating, and more revealing perhaps of your own psyche than Mr. Kling's. Mr. Kling did not say a word about the rape of his daughter. Not one word. Nowhere does he even use the word rape. Do a search on this webpage - the first usage of the word rape is yours.

What Kling said is that he thinks Obama is destroying his daughter's future. Your twisted mind recalled that as an allegorical accusation of rape against President Obama. Your twisted mind reads "watching my house ransacked by a gang of thugs" as a well-worn racist trope concerning the sexually predatory nature of the Presiden't race.

Are you and tarnold and Ralf W completely out of your minds? "Thug" and "gang" are now racist terms? Because you say so? Because of associations that reside in your own minds?

Get a grip. If you have an argument to make on the merits, please do so. Keep the slanderous race-baiting to your sick and nasty selves.

"At least he didn't say that the Obama administration is a bunch of crack-smoking gang-bangers raping our virginal white daughters in front of our very eyes."

No, he didn't. You did. Completely gratuitously.

It seems you are more interested in portraying Kling as a racist than he is in portraying Obama as predatory animal. If you are fortunate, readers will misremember your words as Kling's. Won't that be swell.

"i think it was a weird way for him to complain, to actually bring his daughter into the equation. i mean, if i refer metaphorically to an industry "raping the land," i don't add- "it's like my daughter out there being raped." that's disturbing."

Yes, it is disturbing. Since your mind created that imagery out of whole cloth, while Kling said nothing remotely like that, perhaps you should seek help.

Kling is just a liar.The Cato institute is a joke unless your mentally ill or married to your cousin.At what point do these people feel any shame for all the proven lies?Oh right sociopaths dont feel shame or guilt.that would explain alot huh?

Kling is just a liar.The Cato institute is a joke unless your mentally ill or married to your cousin.

After seeing Kling's measured words, and his personal courage in coming here to respond to criticism himself, I was inclined to give him the benefit of the doubt. But after reading this incisive argument, I see that I was completely mistaken. Surely nobody slandered in this way by an illiterate anonymous troll can be a good person!

Aren't the recessions of '00-01 and '08-'09 a little different? 2000 was simply your standard issue bubble. There weren't trillions of dollars worth of toxic securities and default credit swaps driving a confidence crisis. Banks still loaned each other money. The recession we're in now isn't a business cycle recession like 2000 was. I would be surprised if there are any economists calling for similar mitigation to 2000 for today's recession.

And I imagine Kling saying Obama's policy being un-Keynesian has something to do with the fact that most of Obama's proposed spending doesn't occur for years. Anyone familiar with Keynes would know that the aspect Keynes himself found the most troubling about his own policy perscriptions was whether or not it was possible for government to implement them quickly enough to be effective.

This "stimulus" isn't. It's merely the Democrats taking advantage of the public's ignorance to ram through years' worth of their spending priorities in one fell swoop. Rahm Emmanuel let the cat out of the bag regarding the administration's strategic attitude toward this financial crisis a month ago. Still, what I don't think most Democrats understand is the extent the public will consider the Democrat's ownership of this crisis once this bill passes, and the degree to which the public will hold the Democrats responsible should this recession get worse, which it almost certainly will.

I think about the stimulus as an economist but I feel it as a father. It's like George Bush is the nice neighbour kid played by Freddie Prinze Jr and he is taking my daughter to the the prom. It is like sitting there watching them kids rock the house to the tune of "Rockafeller Skank". That’s how I feel, really giddy.

My opposition to the death tax is on sheer principle, not necessarily because I believe eliminating the tax will curb spending. I just can't get my head around the government taxing my assets while I am alive, and then skimming some off the top right after I die, before my surviving relatives even get their shares. It is bad enough that people concerned with their estates have to worry about a relative staging an Anna Nicole Smith style court room circus by disputing their will no matter how well their estate planning documents were drafted, but to also have to worry about the government putting their hand in the till before the estate is distributed just seems wrong.

Kling isn't much of an economist. He also recently wrote that the way to create jobs is to eliminate the payroll tax, as if simply increasing profit margin will somehow magically increase demand for your product and create a demand for jobs.

Yes, Kling is simply another defeated supply sider, and he's deathly afraid that the stimulus package will work, further exposing trickle-down theory for the sham that it is.

I'm not suggesting that the stimulus package will work, I'm just a dubious as anyone, I'm just saying 'if'.

Right wing or left wing, it makes no difference. It is not about Obama or Bush. I am sure that we can all find plenty more economists or politicians who have more recent views that are inconsistent with what they have said in the past. The question is whether we believe that the size of our national debt is a bad thing and whether we believe that we should during this most recent crisis add to it considerably.